George Osborne, like the rest of the nation, faces a tough choice tonight. Will he and his wife Frances at 9pm sit down to watch Downton Abbey or Andrew Marr’s History Of The World?

At their home in No 10 Downing Street he has come up with an unusual solution. ‘My wife and I normally watch Sunday TV together, but I’m watching Marr in one room and she’s watching Downton in the other,’ he says.

Ever the political strategist, George Osborne realises this may upset Conservative peer Lord Fellowes, the creator of Downton. ‘Julian Fellowes will get p***** off if I say I am watching Marr so I should say I am sure I will watch the box set of Downton Abbey!’ he half-jokes.

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And the foul-mouthed rant at a Downing Street policeman by Osborne’s friend and ally, Rugby School-educated Chief Whip Andrew Mitchell, has done little to counter the wounding jibe that the Tory Cabinet is dominated by ‘arrogant posh boys’.

But defiant Osborne dismisses calls to squeeze the rich as ‘the politics of resentment’.

One by one, he flatly rules out every form of wealth tax, tycoon tax, mansion tax, a new council tax band, property tax or land tax.

FOX GOES TO WAR WITH DAVID CAMERON OVER EU REFERENDUM

Liam Fox last night threw down the gauntlet to David Cameron by challenging him to hold an EU referendum if he wins the General Election in 2015.

The former Defence Secretary said the Prime Minister must pledge a ‘clear timetable’ of holding a vote on the UK’s relationship with Europe by 2017.

Dr Fox, a powerful voice on the Tory Right, said the Tories should campaign with the slogan ‘Back to the Common Market’.

‘We need a single market and a customs’ union – that’s all,’ he said.

The call came as it emerged that novelist Frederick Forsyth has donated £5,000 to Dr Fox’s office – fuelling speculation that the Tory is planning a leadership challenge.

Dr Fox, who was beaten by David Cameron in the 2005 leadership contest, last night insisted the money was to ‘help pay for a researcher’.

Europe is set to be a burning issue at the Conservative conference, which begins today.

Foreign Secretary William Hague yesterday said public consent for a ‘fresh settlement’ with the EU could be sought in a referendum, but did not say when that would be.

In an interview with Tory MP Rob Wilson, to be published today by Total Politics, Dr Fox pressed the Government to set a deadline, saying: ‘We need a clear timetable for renegotiation, with… a referendum at the end.’

Rather than an ‘in/out’ vote, the referendum should be on whether the British people approve of the powers to be repatriated from the EU in a new settlement, he said.

Last night, Dr Fox told The Mail on Sunday: ‘We should go into the Election with a manifesto saying: “Back to the Common Market”.

‘We should set out that there will be a defined period of 18 months for negotiations with Brussels and a referendum within two years of the Election.’

Today’s mansion tax is tomorrow’s raid on a four-bedroom house in a leafy suburb, he suggests.

‘We
are not going to have a mansion tax, or a new tax that is a percentage
value of people’s properties. Before the election they will call it a
mansion tax, but people will wake up the day after the election and
discover suddenly their more modest home has been labelled a mansion,’
he says.

‘We don’t think people who have worked hard, saved up to buy a home, should be clobbered with a mansion tax.’

Adding a new tax band to the council tax for big homes is merely a sinister ploy to let tax snoopers get into people’s homes, he maintains.

‘You would have to send inspectors out [to revalue every home in the UK] and it wouldn’t raise much money,’ he says. ‘I’m not going to let the tax inspectors get their foot in the door.’

Osborne warms to his theme: ‘Nor will there be a wealth tax or annual tax on assets, temporary or otherwise. It is completely unenforceable. It would become a tax avoider’s charter.

‘We want to encourage wealth creators and make Britain a place where people want to invest. It is a complete economic delusion for Labour to say we are just going to tax the rich and that will deal with Britain’s problems – and the country knows it. It is not a them and us situation.’

As Miliband last week tried to steal the Tories’ clothes with his newly minted One Nation slogan and the adoption of Disraeli as a political hero, Osborne is just as happy to steal a traditional Labour position by claiming it is the Tories who get the wealthy to pay more.

Far from being the millionaires’ friend, Osborne insists the rich are already paying more tax under the Tories as a result of the rise in stamp duty and cuts in tax reliefs.

And he is not moved by Labour’s taunt that cutting the top 50p rate means the Tories are handing an extra £40,000 a year to millionaires. Putting it back up to 50p would hit the poor, not the rich, says the Chancellor.

‘Blair and Brown understood the 50p tax rate would not do any good because they didn’t introduce it until the packing cases were being sorted out in Downing Street for Brown to leave.

'The 50p tax rate allows Ed Miliband and Ed Balls to say, “We charged the 50p rate” even though they know it raises no money, costs jobs and investment and the people who suffer are not the richest but the poorest who cannot get jobs.’

No Tory is more sneering towards Labour than Osborne.

Sitting in a high-ceilinged drawing room in the Treasury supported by a staff of more than 1,500 bean-counters, he says: ‘We are cleaning up the mess Ed Miliband and Ed Balls created when they were in this very room.’

And there will be no let-up in Osborne’s war on welfare scroungers. ‘We are not going to balance the budget on the backs of the poorest and those with broadest shoulders must make the biggest contribution, but there’s no fairness in a welfare system where working people earn less than those who stay at home and aren’t working,’ he says.

‘I think about the person leaving home
when it’s dark to work long hours, leaving before the kids are even up.
They walk out of the house, look at the next door neighbour, blinds
pulled down, who’s living on benefits.’

¿We don¿t think people who have worked hard, saved up to buy a home, should be clobbered with a mansion tax¿ Osborne said

George Osborne said the Tories are on the side of the aspiring classes

If the Government gives in to siren calls to abandon his stringent economic medicine, Britain will face the same bankruptcy that threatens to engulf fellow EU nations such as Greece, Spain, Portugal, Ireland and possibly France.

He doesn’t actually name the countries, but he doesn’t need to.

‘Western countries face a simple choice: Are they going to sink or swim? There will be lots of countries, neighbours of ours, not too far away from where we’re sitting, who are going to duck difficult choices.

'In 20 or 30 years’ time they will be much poorer and the world they leave to their children will be considerably worse than the one they inherited.

£35 MILLION BANK FINES TO BE HANDED TO WAR HEROES

Millions of pounds collected in City fines will be given to charities helping the armed forces, the Chancellor will announce today.

It means that money seized by regulators after the Libor-fixing scandal and other breaches of financial rules will go to good causes rather than being ploughed back into the industry.

A total of £35 million received from the financial sector will be spent on the Armed Forces Covenant, which supports soldiers and their families in the battle to obtain appropriate healthcare and housing.

The move, which will be repeated in future years for other charitable causes, will be seen as a response by the Government both to rising banker-bashing sentiment and concern about the human impact of the defence cuts.

Until now, money seized in fines has been used to reduce the annual fee which banks pay towards the cost of being regulated.

Now the regulators will be allowed to take only enough money to cover the cost of investigations, with the rest diverted to good causes such as Help for Heroes and the British Legion.

Mr Osborne said: ‘We will give them the money and say “you decide where it’s best to go”. We are taking from people who have brought our financial system into disrepute and giving it to people who have risked their lives for our national security.’

‘I just don’t want that to be this country.’

Wary of making the same ‘green shoots
of recovery’ prediction that made a laughing stock of another Tory
Chancellor in a similar predicament, Norman Lamont, he will only say:
‘The economy is healing.’ He adds sternly: ‘But it’s a longer and harder road that we have to travel down. There will have to be further cuts.’

The continuing slump has seen Osborne’s ratings disappear off the bottom end of the scale.

London’s St Paul’s School, Oxford and the Bullingdon Club have left an indelible mark on his image.

Cartoonists
portray him as a bumbling Regency fop. Earlier this year, his father,
Sir Peter, gave an interview in which he revealed his expensive tastes
including a £19,000 Italian desk.

But
Osborne refuses to apologise for his privileged background: ‘I’m
incredibly proud of my family.

'I want everyone to have the kind of
education I had, for everyone who wants to set up a small shop like my
mother ran, or a manufacturing business, like my father built up, to be
able to do that. I want everyone to have those things that I was lucky
enough to enjoy as a child

‘I’m not like Labour politicians who
are resentful or mark people out by their background. We are on the side
of the aspiring classes.’

He derides Miliband for targeting Old Etonian Cameron by parading his own comprehensive school roots. ‘If the only thing you can say about the British Prime Minister is where he went to school, you aren’t serious.’

Osborne’s priority, he says, is tackling ‘high tax rates and unaffordable welfare systems’. He was about to include ‘lousy’ schools in his list.

However, apparently fearing headlines of ‘lousy state schools by posh boy Osborne’, he quickly corrected it to ‘…schools that are not performing’.

His rock bottom popularity ratings were borne out by boos when he attended the Olympics. Osborne shrugs: ‘If you got cheered for making unpopular decisions, something very odd would be going on.’

Does he have any ‘wake up at 4am’ moments of anxiety? He replies without hesitation: ‘I will not flinch from the decisions necessary to deal with these problems or play to the gallery.’

He refuses to say if he would resign if
he thought his unpopularity threatened to lose Cameron the next
election. Nor will he comment on claims that there have been rows
between them over tax.

The Chancellor, right, refused to comment on claims he has rowed with the Prime Minister, left, over tax

‘If there are, I’m not going to tell you about them,’ he says.

So is there a soft side to our economic axe man? He cannot recall the last time he cried. ‘I’m not very weepy in movies.’

He saw Keira Knightley in Anna Karenina at his local cinema with his wife and is reading Sweet Tooth, Ian McEwan’s new novel set in 1972, the year before Osborne was born with a Tory government battling economic catastrophe.

He tries to protect his wife and two young children from the goldfish bowl of life in No 10. ‘We go to the cinema with the kids, go shopping. I work hard as a father to make sure their upbringing is not too unusual.

‘I can’t think of the last time anyone came up to me and was hostile or aggressive. Almost everyone who does says, “You have an incredibly difficult job and good luck with it”.’

He will need a lot more than luck.

OSBORNE FINDS £500M TO FREEZE COUNCIL TAX AND CAP RAIL FARE RISES

The Chancellor’s £500 million package of measures to help hard-working families will see council tax frozen and train fare increases capped.

The council tax freeze will be worth £80 a year for the average Band D council tax payer, while the clamp on rail price rises will be worth £45 to the average season ticket holder.

George Osborne has released extra funds from Whitehall to local authorities to enable them to peg council tax for the third year in a row.

And he has told councils that if they want to push the bills above two per cent, they will be forced to put the proposed rise to a local vote – which Ministers expect to act as a powerful deterrent.

Mr Osborne has also responded to backbench lobbying over train fares – which had been set to rise by up to 11 per cent in January – by keeping average rises to 4.2 per cent.

Both measures, which will be funded from departmental ‘efficiencies’, come amid a backdrop of growing concern within the Conservative Party that the squeeze on families’ living standards is doing lasting damage to the Tories’ electoral chances.

The Chancellor said the council tax freeze, costing £270 million, was ‘a practical way to help families’. He said: ‘It shows that when we can find savings we use them to help people with the cost of living. If they [councils] hold the increase to one per cent we will pay out and they can freeze it. If councils want to increase their council tax by more than two per cent they will have to have a local referendum and ask people what they think.

‘I’d be amazed if a council felt they could go to their local people and ask them to pay more tax when councils, like everyone else, must make an effort to save money.’

Extending the freeze to a third year means the average family’s council tax bill is now £148 lower on a Band D home than it would otherwise be.

Train operators had been authorised to bring in average increases of three per cent on top of the Retail Prices Index, which surged to 3.2 per cent in July, the month on which the rises were based.

It would have meant an average rise of 6.2 per cent, but with much steeper hikes on some of the busier routes. Commuter belt Tory MPs said the price rises, which were meant to fund rail improvements, would deter people from working and could harm economic growth.

Fares will now be capped until 2014 at RPI plus one per cent. Long-distance commuters will make significant savings. The annual season ticket from Oxford to London should be around £210 less by 2014 than it would otherwise have been.

Tory strategists are desperate to win back support from alienated members of the ‘squeezed’ middle classes, for whom disposable incomes have dropped by 4.3 per cent since 2010, a fall of £1,100 per household.

They are dreading the potential electoral impact of changes to child benefit which take place from January 2013: A family with two children, where one parent or partner earns more than £50,000, will lose a proportion of the £1,752 a year payout.